Record ProSiebenSat.1 Results Fire Up Takeover Speculation

Private equity owners Permira and KKR are expected to sell their majority stake in the German TV giant this year.

Record results at ProSiebenSat.1, announced Thursday, have sent company stock soaring and fueled speculation as to who may buy the German television powerhouse.

Current owners, private equity firms KKR and Permira, have controlled ProSieben since acquiring a majority stake in the company through holding firm Lavena for $4.2 billion in 2006. They are believed to have been considering an exit for a while, but recently hired JPMorgan Chase to advise them on their options and observers expect a sale some time this year.

The timing for a sale is ideal -- at least judging by ProSiebenSat.1's stock, which hit a 52-week high on Thursday, closing up more than 6 percent after the company reported record revenue of $3.88 billion (€2.969 billion) for last year, a 7.7 percent increase, and a massive 34.2 percent jump in profits from continuing operations to $543 million (€415.1 million).

ProSiebenSat.1's share price gives the company a market value of some $7.52 billion (€5.75 billion).

There has been widespread media speculation that a major international media conglomerate -- Rupert Murdoch's News Corp, Time Warner, Comcast-controlled NBCUniversal or Discovery Communications -- could be among the bidders for Lavena's majority stake.

Lavena, a 50-50 joint venture between KKR and Primera, controls 88 percent of the voting shares in ProSiebenSat.1 and 44 percent of the capital stock. Dutch media group Telegraaf owns the remaining 12 percent of the company's common stock and 6 percent of the capital stock. The remaining 50 percent of ProSiebenSat.1's capital stock is in free float.

Discovery recently stepped up to buy ProSieben's Scandinavian television and radio operations for $1.7 billion but industry observers say a sale to another industry player could prove expensive and difficult.

Groups such as News Corp and NBCUniversal already control some German television assets, a fact that could make it harder to receive regulatory approval for the acquisition of the country's second-largest commercial television group.

"I think a sale to another private equity firm is more likely," one observer said. Sources familiar with the thinking of such companies as News Corp. and Time Warner also signaled that they didn't expect the companies to bid for ProSieben.

But ProSiebenSat.1 CEO Thomas Eberling, for one, speaking on a conference call reporting the group's year-end results, said he would prefer "long-term oriented, non-dominant investors" to another private equity owner. The current owners' control of ProSiebenSat.1 has been marked by controversy as the firms have siphoned off large dividends - including a proposed $1.57 billion (€1.2 billion) dividend from proceeds from the Scandinavian TV sale - while loading up ProSieben with debt.

ProSieben, however, remains an attractive firm for potential bidders, according to analysts. It is the second-largest TV group in Germany, after Bertelsmann's RTL Group, with a 42.8 percent share of gross TV ad revenue in the territory and has been particularly successful in expanding its business into digital and new media platforms.

ProSieben's division Digital & Adjacent, which bundles such operations as VOD platform Maxdome and ProSieben's gaming division, saw revenue soar 38.1 percent last year to $127 million. Even more impressive has been the rapid expansion of ProSieben's production operation Red Arrow Entertainment. The division, which owns stakes in some 18 production companies in 9 international markets, saw explosive sales group of more than 150 percent last year to $75.5 million.

Whatever the outcome of the expected ProSieben auction, 2013 is certain to be one of major change on the German TV market. In another major deal, Bertelsmann has announced it is looking into an option to sell part of its controlling stake in RTL in order to raise cash for international acquisitions.